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Baird, Kurtz, Dobson sits atop CPA heap.

Baird, Kurtz, Dobson Sits Atop CPA Heap

The world of accountants is sometimes a vibrant and violent one contrary to the stereotypical images of number crunchers clad in green visors and arm garters.

War stories abound where clients and their cash flow are employed as weapons. One such clash that gained local notoriety ended with the ouster of Frost & Co.'s namesake founder during an internal power struggle.

H.G. "Jack" Frost Jr. found himself on the outside looking in after a cadre of bright young accountants he hired forced him out. The reported ultimatum was, "we leave or you sell." And sell he did.

Then there are high-flying flameouts exemplified by CPAs Phillip Lynn Lloyd and W.A. "Tony" Rand. Both crash-landed in bankruptcy court after taking off in pursuit of solo business opportunities.

In the more sedate realm of sharp pencils and calculators, the men and women operating CPA firms are typically smooth and personable. They represent one of the most powerful forces in the business world; they know where the bodies are buried, whether it's inside their firm or their client's company. Scratch a successful corporation, and you'll almost certainly find a successful CPA firm.

Accounting firms can be divided into three categories:

* Large, multinational firms, specifically the companies known as the Big Six, pared down from the Big Eight by a couple of strategic mergers.

* Regional firms with offices in several cities around the country.

* Smaller, local, sole proprietor firms.

Three of the Big Six companies have Little Rock offices and one of those, Ernst & Young, heads Accounting Today magazine's Top 60 CPA Firms, calculated by revenues. But Arkansas's largest CPA firm, in terms of numbers of professionals and locations - and the 14th biggest in the nation by revenues (a projected $52 million for 1990) - is a regional firm, Baird, Kurtz and Dobson.

With 120 professionals and five locations in Arkansas, BKD specializes in closely held businesses. About one-fourth of the firm's 25,000-plus client base is in health care, medical services and financial institutions.

Bill Magee, a partner of the firm's Little Rock office, says, "We are recognized specialists among the CPA firms in the areas of health care and financial institutions."

BKD handles Securities Exchange Commission work for such clients as Arkansas Electric Cooperative, Great Southern Bancorp Inc., and Midwest Grain Products Inc. Magee says it's a misconception that local and regional firms shy away from publicly held companies.

"It's not unusual at all. If you get outside the Fortune 500, a large portion of companies are handled by firms such as ours who are members of the SEC Practice Section of the American Institute of CPAs. It's just that there's not that much of it in our market segment, so we've grown a clientele that's based primarily in owner-operators."

Magee thinks one of BKD's advantages is its Springfield headquarters. "We don't have large New York offices that require a lot of overhead and a lot of high fees," Magee says. "We run pretty lean and work pretty hard so we can keep our fees down.

"The main thing that makes BKD different than most of the other firms is that our partners are heavily involved in service to our clients. The larger firms do a lot more delegating than we do. We believe that enables us to carry a lot of expertise to our clients, and because we don't have a lot of overhead, we can do that at rates that are often lower than the international firms."

Management consulting accounts for a big chunk of a CPA firm's service to business clients, and BKD puts a slightly different twist on theirs, hosting off-site business retreats and giving advice and guidance on employment policies and practices, including the psychology of hiring and terminating employees.

"It's more participating in the decision-making process than just responding to a financial problem," Magee observes.

By Accounting Today estimates, Ernst & Young - created by last year's merger of Ernst & Whinney and Arthur Young - had revenues of just over $2 billion for fiscal year 1989. The New York-based firm's client list reads like a Who's Who in Arkansas Business and includes Wal-Mart, Tyson Foods, TCBY Enterprises, First Commercial Bank, Arkansas Best Corp., BEI Electronics, and Ensco. Its 67 professionals make it the second largest CPA firm in the state.

Ernst & Young does audit, tax and consulting work for smaller companies but, like most of the other accounting firms, guards the identity of private clients. Terry Elliott, office managing partner in Arkansas, cites SEC-reporting companies, banks, hospitals, trucking companies, and manufacturing companies as his main clients.

"We do a lot of small businesses," says Elliott. By "small," he is talking about $10 million or less. "A lot of our individual tax return work is with just regular-type people. When we started with TCBY, they were a relatively small company." The frozen yogurt company signed with the Big Six firm in 1983 when it was preparing to go public.

Big Six firms are equipped to finetune a company's foray into foreign markets and can coach them on important differences in business tactics and cultural mores. "In Japan, they don't do business like they do in Arkansas," says Elliott. "They move at a more deliberate pace, developing a relationship before getting into a business opportunity."

Elliott says "information systems," including implementation of computer programs, is probably the biggest area of consultation presently provided by accountants.

With 48 professionals, Frost & Co. is the state's third largest CPA firm, and managing director Stephen Humphries considers it a regional, rather than a local, firm although Little Rock is home to Frost's only office.

Frost is the largest accounting firm based inside the state and Humphries sees that as a big selling point. "All of our partners are in Little Rock and all the decisions are made here. The other firms are bigger. They have different structures and they have to report to people outside of Arkansas. We don't."

The poultry industry accounts for Frost & Co.'s largest client base - about 30 percent - with companies all over the country. Frost also services hospitals and banks.

Frost does no SEC work and concentrates on family-owned, closely-held corporations, providing mainly auditing and tax services. "There are a lot of very big family-owned businesses," says Humphries, "and passing that on to the next generation without giving a ton of it to the government is a very important part of our practice, especially now."

Deloitte & Touche (formerly Deloitte Haskins & Sells and Touche Ross) is ranked fourth nationally (with estimated revenues of $1.9 billion for fiscal year 1989) and fourth in Arkansas with 38 professionals.

"Financial institutions, real estate, health care, and manufacturing - those four are kind of the big ones for us," says Mike Haigh, managing director. Clients include Dillard Department Stores, Arkansas Power & Light, Affiliated Foods and ConAgra. Smaller, local clients include Bale Chevrolet, Sidney Moncrief, Arkansas Children's Hospital and Flake & Co.

"We serve a host of individuals and very small companies," says Haigh. As an example, he mentions the Nite Lite Co., which makes lights used in coon-hunting. "That's an advantage in being in the type practice that we have because we've just got clients all over the board as far as size goes."

The Big Six accounting firms are excited about the possibilities now opening up in eastern Europe. Deloitte & Touche answers inquiries in its Little Rock office and also may refer interested parties to its offices in New York and Washington, D.C.

"We're fortunate, too, to have an increasing Japanese practice here in the state," says Haigh. "For example, we are auditors for Tokusen, a new manufacturing plant in Conway and also for Omega Tube & Conduit here in Little Rock." The Japanese affiliate of the Connecticut-based firm is the largest accounting firm in that country.

The official worldwide name for Arkansas's fifth largest CPA firm with 34 professionals (and the nation's third, with estimated fiscal year 1990 revenues of $1.92 billion) is KPMG Peat Marwick (from a consolidation with KMG Main Hurdan). In the United States the firm goes by Peat Marwick.

The New York-headquartered firm, founded in England over a century ago, was the first international CPA firm. Managing partner Jerry Walton says the complexities of doing business on a worldwide basis have made his work more difficult.

"Its differences in dealing with the monetary system and the language barriers that are prevalent, even in big business - or little business," Walton says. "It's incredible how many people are doing business internationally. We've got quite a few in the Little Rock office. You'd be amazed.

"It's no longer good enough just to be a good auditor or just a good tax person. You have got to be an outstanding business adviser if you expect to service companies like Acxiom, J.B. Hunt Transport, Stephens Inc., Worthen Bank - some of the people who are our clients. They demand services, they demand advice, they demand it quickly, and they deserve it."

Thomas & Thomas, a local firm, is the state's sixth largest with about 30 professionals and offices in Little Rock and Texarkana. "Most of our companies are privately held," says Don Smith, managing partner of the Little Rock office, though he wouldn't characterize their clients as "small."

The firm's practice runs the gamut of business and industry in Arkansas. Smith will name only those known as a matter of public record, including the Little Rock School District, Arkansas Education Association, Centers for Youth and Families, and the Texarkana public school systems in Arkansas and Texas.

Thomas & Thomas works for attorneys in litigation matters, "maybe more so than a lot of firms," says Smith. "I would say that would be considered a specialty."

While all of these firms seem to have found their niche, they also share at least one other distinction. In a real way, they all provide the actual muscle for a lot of Arkansas' healthy corporate bodies.

Table : TOP CPA FIRMS IN ARK. (Ranked by revenues in millions)
Ernst & Young 2,195
KPMG Peat Marwick 1,929
Deloitte & Touche 1,900
Baird Kurtz & Dobson 53

Note: Chart shows top firms ranked by revenues for most recent fiscal year. Reprinted from Accounting Today.
COPYRIGHT 1990 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:Arkansas' largest accounting firm
Author:Mills, Letha
Publication:Arkansas Business
Date:Nov 12, 1990
Previous Article:What a Mann!
Next Article:Fairfield fights for its life.

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